Question 3 Not yet saved You discover an investment costing $500 which has an expected...
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Question 3 Not yet saved You discover an investment costing $500 which has an expected total return of 12% pa, but a required return of only 10% pa. Of the 12% pa total expected return, the capital return is expected to be 7% pa. Assume that the required return of 10% remains constant, the dividends can only be re-invested at 10% pa and all returns are given as effective annual rates. Which of the following statements is NOT correct? Marked out of 4.00 Flag question O a. You would use a discount rate of 10% to find the NPV of this investment O b. The investment's price at time t=20 would be $1,934.842 O c. The investment is currently under-priced O d. When plotted on the Security Market Line, the investment would plot below the SML. Oe. The expected dividend return is 5%
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